There are many people who are afraid that their money is at risk. Many banking panics and runs could occur if the government did not have the money on deposit FDIC insured. The fact that people know their money is safe keeps them from getting scared and putting the money into a matress.
So far the FDIC had managed every banking crises that we have recently been through very well. No matter what has been happening the banks have been pulling out of the struggle and building themselves back up to what they originally were, and serving the peoples financials very well indeed.
Yes, the FDIC manages banking crises effectively, because they insure depositions. Each person only loses what they have deposited over a certain amount. That way, most people are not really upset by the collapse of a bank, because they do not lose anything personally. It is a good insurance company that serves the public.
The FDIC does not manage banking crises effectively. The recession we have been in is a direct result of the FDIC doing their job in a very poor manner. The Banking Collapse of 2008 shows that the FDIC was and has been unable to manage the various problems that have occurred in the banking world. They have not maintained any stability or public confidence in the banking world.
The FDIC was set up to insure depositors would receive a minimum amount of their money was returned to them in the event that a bank failed. The United States elected to fund these failing banks the last time it happened rather than let them fail, making the FDIC pointless and therefore taking away their responsibility to handle bank crises.